Year-End Tax Planning Tips

Personal Finance, Planned Giving

As the holidays draw near, it’s time to consider year-end planning options. Just as an annual physical is important for monitoring your physical health, an annual financial assessment is an ideal way to monitor your financial health and provide the opportunity to make adjustments before the December 31 deadline.

The Thanksgiving holiday is a great time to sit down and analyze your financial situation and implement a plan to make sure you are on target with your goals. Following are several options to consider:

Charitable Gifts

A number of tax-advantaged options are available for those wanting to make year-end contributions. Consider the following options for making a charitable donation:

Cash Cash contributions can usually be completed quickly right up to year-end. A popular option for those wanting to give cash is a Donor Advised Fund (DAF). It’s a convenient option with no cost to set up and minimal paperwork. With a DAF, you advise how and when funds are distributed to ministry. Another option for cash funding is a Gift Annuity, which can provide fixed income for your family and the opportunity to support ministry with the remainder. By funding with cash, a significant portion of the income from the annuity may be tax-free.

Appreciated Stock Giving appreciated stock is an ideal way of making a gift to ministry because the ministry will be able to use the value of the gift now, and you may be able to avoid the imposition of capital gains tax on the gift. Learn more about the value of giving appreciated stock. In addition to funding a Gift Annuity, appreciated stock can also fund a Charitable Remainder Trust. This type of trust is designed to offer immediate tax benefits and allow your family to receive income for a period of time, after which the remainder of the principal is transferred to a ministry of your choice.

Appreciated Real Estate By gifting appreciated real estate, the ministry of your choice will be able to sell it and enjoy the full proceeds, while you will be able to avoid capital gains tax. Real estate may be used to fund a variety of giving vehicles including Charitable Remainder Trusts, Donor Advised Funds, and Endowments.

Family Gifts

If your circumstances allow you to start transferring some of your assets to your children and grandchildren now, consider making annual exemptions gifts. For 2016, the IRS allows a person to give a total of $14,000 to any number of recipients free from any gift tax. This means a husband and wife can transfer $28,000 (two $14,000 gifts) to the same individual or several people.

Adjust Capital Gains and Losses

If you have had gains on capital items in your investment portfolio, you may be able to make adjustments before the end of the year to lower or eliminate your tax liability for net capital gains. This is done by selling underperforming investments to help offset the total gains you received, thereby lowering your taxable net capital gain amount.

Manipulating Income and Deductions

Depending on your circumstances, you may be able to time your income and deductions to maximum tax advantage. Common examples would be delaying the receipt of a year-end bonus until 2017 or paying some 2017 deductible expenses by year-end. The goal is to offset income with expenses to minimize tax liability.

Contributions to Retirement Plans

Increase or maximize your contributions to qualified retirement plans [IRA, 401(k) and 403(b)], especially if your employer has a matching program. Employer matching programs provide free money, which adds immediately to the investment return. If you are age 50 or older, take advantage of available catch-up contributions.

If you would like assistance implementing some of these ideas or developing a year-end giving strategy specific to your situation, please call 866.945.6350 to speak to an AG Financial Planned Giving Consultant.

This information is not legal or tax advice. Information is from sources deemed reliable. Information is subject to error, omission, withdrawal, or change. Contact your own legal or tax advisor before taking any action that would have a legal or tax consequence.